The houses, taken from debt-laden homeowners, were sold to bidders on courthouse steps statewide.

John Spink/Staff
(ENLARGE)
Investors crowd the steps of the Fulton County Courthouse on Foreclosure Day — the first Tuesday of every month — to bid on homes repossessed by mortgage lenders. One in every 449 households in Georgia faces foreclosure proceedings.

The increasingly busy monthly auctions show that not all of the residential market is in decline.

Foreclosures are rising.

More than 115,000 properties across the country were in the foreclosure process in October — up 42 percent from the same month a year earlier, according to RealtyTrac, a California company that tracks foreclosures.

Foreclosures in Georgia are up a stunning 99 percent in the past year.

The state now has the nation's third-highest rate of foreclosures: One in every 449 households. In October, that meant 6,895 properties were in the foreclosure process.

Not all changed hands. Some homeowners came up with the needed payments; others couldn't afford the whole debt but lenders agreed to a delay while they worked out a payment plan. Still, hundreds were auctioned.

The taking of homes — generally because the owner hasn't been making mortgage payments — has always been brisk here because state laws are written for speed. Georgia is one of three states in which lenders can foreclose on houses in as few as 37 days.

Foreclosures ramped up in recent months as once-low introductory interest rates on adjustable mortgages edged up, making monthly payments unaffordable for some homeowners.

Qualified borrowers several years ago could get mortgages with rates below 4 percent, but at the end of the starter period, those rates could adjusted skyward by 2 or 3 percentage points. That would add more than $300 a month to a mortgage of $250,000.

"We really haven't had any letup," said Ralph Goldberg, a Decatur attorney whose clients include many distressed homeowners. "We know, toward the end of the month, people are going to be coming in. The Friday and Monday before [monthly] Foreclosure Day are always busy."

A foreclosure dashes a person's dream of home ownership; it also tarnishes a consumer's credit and makes future borrowing more costly.

The danger for the overall economy is that a rising pool of foreclosures will overflow into other segments of an already troubled real estate market.

Most critically, foreclosures add to the number of homes for sale. They offer bargains to buyers, but dampen the prices other sellers might get.

In addition, many of those who lose their homes also are losing the largest investment of their lives, a source of both confidence and cash.

Marginally qualified

The surge of foreclosures is, in some ways, the backwash of the five-year housing wave that began washing out last year.

Homeownership, construction and sales reached unprecedented levels, partly because lenders tried so hard to get people into houses. By standards of the past, many first-time purchasers were marginally qualified, with modest incomes and little in savings.

But with creative mortgage arrangements, the buyers often were able at least to start off paying interest rates dramatically below market levels. They often avoided a down payment entirely. Atlanta has been among the nation's leaders in the percentage of borrowers taking adjustable rate or interest-only mortgages.

"They get qualified at the teaser rate," said attorney William J. Brennan Jr., director of the Home Defense Program Atlanta Legal Aid Society. "Of course, they can't afford to pay when the rate goes up."

Most foreclosures happen on mortgages held less than five years, according to a study last year by Harvard University's Joint Center for Housing Studies.

Goldberg, the Decatur attorney, said an increase in mortgage payments can be crippling.

"There are a lot of people who seem to have mortgages that are astronomically high, and they are just being eaten up," he said. "You look at the money they have, and you look at the mortgage, and you think, 'How did this happen?' "

Professionals hit, too

Lenders have a powerful incentive to find and qualify borrowers — whatever their income or past. The risks are eliminated for lenders that sell the loans to companies that package thousands of loans together. Those firms figure any defaults will be offset by the vast majority of loans that are profitable.

Buyers are willing co-conspirators. Buyers often lose their homes because they have no cushion to absorb unexpected expenses.

"We see people with the same issues over and over," Brennan said. "There's a death in the family, or someone is losing a job, or someone gets sick."

That can mean trouble even for white-collar professionals.

Phillip Newman is a mechanical designer. He bought a home in Lithonia two years ago, obtaining a mortgage that required a monthly payment of $1,260.

Four months later, his company was purchased and his job eliminated.

He was out of work for five months, then found a one-year contract job. When that ended, he scrambled for three months and in July found his current position — where he makes about 25 percent less than he had as a consultant. He fell way behind in his mortgage payments and was scheduled for foreclosure in October. He says he cut spending: He has no cable television, no cellphone, no Internet connection.

He kept talking to the mortgage company and arranged to pay a little more each month to catch up — something that the new job makes possible.

"Hope the car doesn't break down," he said.

One sign of how widespread foreclosures have become is the growing willingness of lenders to negotiate with delinquent homeowners, said Herb Heitman, an Atlanta bankruptcy attorney. "Ten years ago, they never made deals."

Local agency busy

In January, the Consumer Credit Counseling Service of Greater Atlanta assisted 450 people with financial troubles — nearly all of them dealing with the threat of foreclosure.

In October, the agency counseled more than 1,000, said Susan Hunt, director of the housing program.

"I have doubled my staff, and we still haven't met the need," she said.

In some ways, it's the same as always: People lose a paycheck or hit a sudden expense, Hunt said. But it's different, too. Millions of home buyers are just coping with their first big jump in mortgage rates.

"About 40 percent of the people we talk to have a mortgage with an adjustable rate," Hunt said. "And that is true across the board. We have people who live in Alpharetta in great big mansions. Their adjustable rate escalates, too."

By Foreclosure Day, it's too late for Consumer Credit to help, Hunt said.

"Someone will call and say, 'I am on the courthouse steps, and my house is next. What can I do?,' " she said. "And we can't do anything then."

Banned

I think that you will see that number rise even higher over the next two years in Georgia, all these 300k plus homes being built and sold and people living outside their means, you'll be able to buy some nice homes for a deal with the banks looking to unload the loss

" We cannot but pity the boy who has never fired a gun; he is no more humane, while his education has been sadly neglected. " -Henry David Thoreau

Don't get me wrong, I was tempted too. We seriously considered a 2200 square foot house. Luckly, we didn't make that kind of plung and settled on a 1564 sq foot house over a 1000 sq foot basement (400 sq ft of which we finished). It has been PLENTY of room.

Credit cards will never find their way to a second mortgage or line of credit attached to my house. That is just scary!

GONetwork Member

Senior Member

I'm glad.It gives us a sense of permanence to still be here.So many homes have been foreclosed on and rebought and gone to section 8 rentals in our neighborhood,that those of us with still here can't sell our houses.Why would a person pay regular price when they can purcase it through a hud auction,put 2200$ worth of carpet and paint in it,and still owe less on it than we do?

It has killed our resale values.I can't sell my house right now with enough profit to pay an agent.........and we've been here since the sudivision opened.....

It's really nice here though.We've had 3 bikes stolen out of the yard and my truck broken into.We are awakened at all hours of the night by kids crusing through showing off their speakers.13-14 year old kids refuse to get out of the road where they are hanging out,unless they recognize your vehicle They all have yards but insist on standing in the middle of the street talking........2 got ran over a few weeks ago,maybe that will send a message......

The worst of it is we live in the country in what should be a decent subdivision,but may as well be in an apartment complex....

"people ask,'what's a man my age doing planting oak trees?'
I believe the good a man does lasts long after he's gone"RIP WOODY

Senior Member

I guess we're finding out the supposed "housing boom" is really a phony baloney, plastic banana good time rock and roll thing. To borrow a line from Rush.

Seriously, when I hear "more people own their homes than ever before" from Sean Hannity, I think "no, the bank owns more houses than ever before, and more people are in over their heads in debt more than ever before." This is proof of that.

When people I know make a little more than I do and have a house that costs twice what mine does just because they can get the funding, something is wrong with that picture. They're about to find out just how wrong they were.

T

"I have never heard anything like a woman's scream from a panther"
Ben Lilly

Senior Member

Interest rates were dropping, people were keeping up with the Jones', mortgage bankers were pushing ARM's and dummies were taking them. Now it's time to pay the band and the folks with these ARM's can't afford them.

Why would anyone with half a brain have taken an ARM knowing they couldn't afford the payment to go up? The only thing I can think of is that they were crossing their fingers and hoping the extremely low interest rates would go even lower.

Senior Member

Interest rates were dropping, people were keeping up with the Jones', mortgage bankers were pushing ARM's and dummies were taking them. Now it's time to pay the band and the folks with these ARM's can't afford them.

Why would anyone with half a brain have taken an ARM knowing they couldn't afford the payment to go up? The only thing I can think of is that they were crossing their fingers and hoping the extremely low interest rates would go even lower.

I think it is because most of them are ignorant to be honest. Think about it. You've never bought a house before, you have no idea what REAL economic hard times are about (early 80's was about the last rough spot) and most americans have become accustomed to relativly low interest rates (see chart) . Heck, I bet a lot of them think the federal reserve exists to give them a low rate, but we won't go there.

Who here hasn't heard the ads on the radio about "interest rates are coming down/interest rates are going up, so get it now while you can". Does anyone think it's beyond the average mortgage broker (SALESMAN) to say "Hey, get an ARM now, then when it comes due the rates are bound to be lower"?

I'm not laying the blame anywhere but on the people that signed the paperwork, but ignorance is ignorance.

T

"I have never heard anything like a woman's scream from a panther"
Ben Lilly

Senior Member

I see most of the foreclosures in our county are 1-4 year's old. A lot of them are probably those funny adjustable rate loans with low initial payments.
I think a lot of those people took a flight in a Hindenburg, another zeppelin that's coming down in flames.

Some investors are going to have to count their funny money losses.

Back some 35 years, I was working at a savings and loan checking the mortgage loans. One borrower had one of the best rates, a fixed rate of -10%. High rates tend to suppress increases in value.